Gubernatorial candidate Bill Haslam refuses to release tax returns

Susan McGroom, who lives in the shadow of Chilhowee Mountain, worries about a real estate development backed by a group of investors that includes gubernatorial candidate Bill Haslam.

Marc Perrusquia/The Commercial Appeal

Bill Haslam's personal financial disclosure form reveals more than 350 investments, including these:

Knox Holdings, Inc.

A private equity investment. Haslam's CPA, J. Todd Ellis, said the entity has an interest in a New York insurance firm. Neither he nor Haslam could recall the name of that firm in interviews.

Holrob

Haslam holds investments in 10 separate ventures with Holrob, a real estate firm with offices in Knoxville and Nashville. Those ventures paid Haslam $258,000 last year in interest and cash distributions, according to his campaign. Ellis said the Holrob investments, like most of Haslam's 60-some private investments, are "long-term investments that won't pay out cash."

Hasbitt Realty and LVL Properties

Partnerships that own two condominiums and commercial property in Seaside, Fla. Haslam declined to name his partner, describing him as a friend and "a doctor who lives in Alabama."

Flautt-Cornerstone Bay Point LLC

An entity invested in the Marriott Bay Point resort in Panama City Beach, Fla. Haslam said he thinks he owns 2-3 percent of the property, which includes a luxury hotel, marina and two golf courses.

Qualified Subchapter S Trusts

Trust funds set up for the Knoxville mayor's three children, Leigh, 21; Annie, 23; and Will, 25. The funds paid Haslam nearly $1.1 million in interest income last year under an arrangement that allows him to convey assets to his children while avoiding steep gift taxes. Ellis said Haslam sells Pilot stock each year to his children. He holds a loan note that pays him principal and interest. Taxes on the income he receives are less than gift taxes he would pay if he turned over the stock free of charge. The payments are financed by money earned from assets stocked in each of the childrens' trust funds.

WALLAND, Tenn. -- Here in the shadow of Chilhowee Mountain, Memphis transplant Susan McGroom relishes her "slice of heaven," yet worries over a budding real estate development backed by a group of high-powered investors that includes Republican gubernatorial nominee Bill Haslam.

"The number of (planned) homes has about doubled," says McGroom, 53, who lives with her husband on 111/2 acres of sloping land below one of Chilhowee's three peaks, known as the Three Sisters.

The Three Sisters project has received wide attention in East Tennessee, hailed as an environment-friendly development that will help preserve thousands of acres along an impressive 9-mile ridge south of Maryville.

Less visible, however, is the project's financing -- including tax breaks that Haslam and his partners stand to realize from conservation easements placed on the property.

Bucking a tradition among Tennessee gubernatorial candidates, Haslam has declined to release his tax returns, documents that would help detail his considerable wealth, tax credits and deductions, and potential conflicts of interest.

State government regulates several of Haslam's business interests. The Tennessee Department of Environment and Conservation uncovered a minor violation on the Three Sisters tract in 2007. Two years later, the state sued Pilot Corp., the Haslam family's chain of truck stops and convenience stores, for alleged price gouging.

A look inside Haslam's financial portfolio reveals scores of other ventures, including insurance and real estate interests that could potentially interact with state government, as well as a number of funds in which a precise business focus is difficult to ascertain.

Figures released by his campaign show he's earned an average $4.4 million annually over the past seven years through investments and interest alone. That doesn't include Haslam's income from Pilot, a nationwide firm with annual sales of $16 billion. Haslam declines to disclose his Pilot income and hasn't released his net worth.

Democratic challenger Mike McWherter argues Haslam owes the public greater transparency, a sentiment echoed by public-interest advocates who embrace disclosure of tax returns by candidates for high office.

There's no legal requirement to release personal tax returns, but it's been done in varying degrees for decades in Tennessee by officials ranging from former governors Don Sundquist, Phil Bredesen and Ned McWherter (father of the current Democratic nominee) to U.S. senator Fred Thompson.

Outgoing Gov. Bredesen, the wealthiest Tennessee governor in modern history, released 10 years of returns -- IRS form 1040 along with schedules listing itemized deductions for three of those years -- during his first successful run in 2002, though he later provided only summaries.

"The bottom line is the more the public can know about the (finances) and potential conflict of interest of the candidate, especially for the higher offices, it makes the public more confident,'' said Dick Williams, chairman of Common Cause of Tennessee, a nonpartisan public watchdog group.

Haslam says he'll put his non-Pilot assets in a blind trust if elected.

He contends that his tax returns wouldn't tell the public anything more about any potential conflicts and says he's aware of just two groups demanding release of his returns -- the media and his political opponents.

"The public knows everything I own. And there's no secret about the Pilot connection at all," said Haslam. He's released figures detailing his tax payments -- $1.6 million over 2007 and 2008, the most recent years available -- and has provided numbers of personal financial details through his accountant.

"I honestly don't know what the public doesn't know about me that will help in making a choice about governor. ... I understand in running for public office there's a public obligation ... but at the end of the day you decide what is the right thing to do for voters. And I honestly believe we've done that."

Records show Haslam holds more than 350 separate investments including hedge funds and stock in corporations ranging from pharmaceutical giant Abbott Laboratories to Coca Cola, Kimberly Clark, First Tennessee Bank and more obscure entities such as Cash Store Financial Services, a Canadian firm that makes pay day loans.

Like the Three Sisters project, about 60 of those investments are private, closely held investments not available to the average consumer on the open market.

They include investments in the Bay Point Marriott resort in Panama City Beach, Fla., condominiums in nearby Seaside, a New York insurance firm, a failed Illinois biodiesel plant venture and a smattering of apartment complexes and commercial properties across the Southeast.

"Typically it's some business relationship or family relationship. That's how most of these are going to come about," said J. Todd Ellis, Haslam's CPA.

An example of such a connection is Anderson Growth Partners, an obscure Birmingham investment firm described by Ellis as a "closely held group of investments ... run by the Anderson family," founders of Books-A-Million, the nation's third largest book retailer.

Haslam holds 11 separate investments with Anderson, including some with exotic names such as "Anderson New Russia Fund," and "Anderson Emerging Markets Macro Partners."

The investments appear on paperwork Haslam is required to file with the state as a candidate for governor. The state's personal financial disclosure law doesn't require candidates to cite specific profits or dollar values of investments. A candidate must simply list the name of any "major sources of private income of more than $1,000," and "any investment ... in excess of $10,000."

Haslam allowed The Commercial Appeal to interview his certified public accountant at his campaign headquarters in Nashville. There, Ellis released Haslam's investment income totals -- $2.4 million in 2009 -- which included a $74,392 cash distribution from one of the Anderson funds, Anthony Anderson LLC.

Ascertaining additional details was difficult.

The website for Anderson Growth Partners is a single page containing a single sentence that says the firm is in Birmingham and is "an investment management company that provides investment and strategic advisory services for families."

Likewise, Memphis-based NFC Investments, where Haslam holds two investments including one that paid him $37,250 last year, has a single-page website that lists some phone numbers and an address but little else. The head of the firm, Charles Slatery, declined comment. "I don't really know if I should be discussing Bill's personal finances with you," he said.

Both NFC and Anderson are registered with the U.S. Securities and Exchange Commission as investment advisers with fewer than 100 clients each.

Such information doesn't provide any meaningful form of disclosure, said Bill Allison, editorial director for the Sunlight Foundation, a Washington-based nonprofit, non-partisan organization advocating transparency in government.

"How can you know if a gubernatorial candidate has a potential conflict or not?" he asked.

Common Cause's Williams said competing public and private interests make it difficult to know where to draw the line when disclosing personal financial information. Still, he said, the failure of a candidate to release returns often leads to suspicion.

"It always raises your eyebrows if nothing else: Why don't they want to reveal what this is?" he said.

Democratic challenger McWherter, the owner of a Jackson beer distributorship who disclosed his returns and estimates his net worth between $7 million and $20 million, pounced on Haslam for his stance last month. McWherter accused the Republican of engaging in a "shadowy" deal through Pilot that indirectly linked the firm to clients in Iran.

Responding through a spokesman, Haslam called the allegation "silly and insulting to the voters of Tennessee."

Still, Allison said a gubernatorial candidate's personal tax returns should be disclosed because they not only help flag conflicts but provide details on tax credits and deductions as well as insight into tax policies the candidate might pursue as governor.

Returns also can help flag business relationships, like the one at Three Sisters.

The Haslam family teamed with other prominent East Tennessee families in 2007 to buy 5,000 acres along Chilhowee Mountain in Blount County for $19.1 million. Partners include Ruby Tuesday restaurant chain founder Sandy Beall, former Sak's CEO Brad Martin of Memphis and the four children of U.S. Sen. Lamar Alexander.

Beall said the Haslam family's share in the project is 15 percent. Bill Haslam said his personal interest is five percent.

"This isn't about making money ... It's a social responsibility," said Beall, whose family has a huge investment nearby at the Blackberry Farm resort. "We've protected the most critical nine miles of all ... whether we get money out of it I don't know."

Trying to protect "the view shed" and prevent the type of mountaintop development that's plagued adjacent Sevier County, the families teamed to place restrictions that will forever ban development atop Chilhowee. Beall said they acted after a developer came forward with plans to develop on the mountain.

Still, the Three Sisters group has plans to eventually put about 100 homes on 1,200 acres along the mountain and also stands to benefit from tax breaks associated with a conservation easement protecting the mountain ridge from development.

Such an easement often translates to millions of dollars in tax savings because an investor can deduct the difference between the value of the undeveloped land and its value had it been developed.

"You'll get a little of (the investment) back," agreed Beall, who declined to release the value of the easement on Chilhowee. "It's not significant to (Haslam). I can tell you that."